Many conventional transaction cards, such as credit cards, or other financial transaction devices provide incentives to the customers to encourage use of their cards over other transaction cards or other forms of exchange. Typically, this involves using a credit card where the customer gets one free frequent flier mile with a particular airline for every dollar he or she charges on his or her credit card. By getting free frequent flier miles, the customer is enticed to use this particular credit card over other credit cards, money, checks, and automated bank cards. Similar incentive programs include obtaining points or dollars towards the purchase of automobiles, electronic equipment, music CDs, and phone service.
Typical examples of the prior art relating to such transaction devices include the following. U.S. Pat. No. 5,787,404 issued to Fernandez-Holmann discloses a system for using a credit card for two purposes. The first purpose is to provide a method of payment into an individual's retirement fund should the individual forget to make a payment. The individual's credit card is debited, and the money is transferred to the individual's retirement fund if a payment is not made into the retirement fund by a specified date. The second purpose of the system is to provide a method of allowing an individual to contribute to his retirement fund by having a percentage of total purchases made with the credit card within a month deposited into the retirement fund from the credit card issuing company.
This system is limited in many ways. First, the individual cannot use his incentives to purchase particular stocks in particular companies. Retirement funds are typically managed by a company or person who decides into which investments to buy given the state of the various markets and the managing company's or person's intuition. The actual cardholder cannot make any decision regarding his contributions to his retirement fund at any time.
Additionally, the Fernandez-Holmann patent only addresses retirement funds or other long-term investments. It does not provide for a more liquid-type asset, such as a stock purchase, which can be liquidated relatively quickly without penalty.
Another issue not addressed by the invention of the Fernandez-Holmann patent is the lack of loyalty between the customer and the investments made on the cardholder's behalf through this system. In this system, the customer typically does not know exactly where his funds are going because the decision to place the funds into a particular asset is performed by a company or manager who is not the customer. Therefore, the cardholder cannot develop a loyalty to a particular company through a retirement fund since it is very likely the cardholder's funds will be spread across a plurality of investments unbeknownst to the cardholder.
The invention of the Fernandez-Holmann patent also suffers from its inability for the cardholder to exercise control over his rebates. Every specified time period, the total amount of purchases by the cardholder are used to calculate how much money is to be deposited into the retirement fund. If market forces are weakening over a projected short term, it would be in the best interest of the cardholder to hold this automatic payment and wait for costs of certain investments to stabilize before purchasing them. This will avoid a short term loss that gets amplified over the long term.
There are also six problems typically associated with the conventional incentive programs mentioned earlier. First, the incentives to the customer, such as accruing frequent flier miles and points redeemable for money back on the purchase of a new car or electronics, do not fit every credit customer. Most people purchase a car every three years or longer. Thus, if the customer is only a moderate card user, he will not acquire enough redeemable points to see a real difference in the purchase price of a car. The same proposition holds true for a person redeeming his frequent flier miles. A moderate card user receives a travel voucher for a flight of 25,000 miles or less or an upgrade to first class only after a lengthy time period of credit card usage. Thus, the prospect of either a small reward or the prospect of receiving any reward in the distant future is not enough of an incentive for a customer to use his credit card over any other form of payment.
Second, most incentive programs place expiration dates on the incentive points. Typically, this requires a person to redeem his frequent flier miles or other incentive points towards an automobile rather quickly. Thus, a customer may purchase a flight or a car before he or she truly wants to in order to avoid the expiration of the accrued incentive miles or points.
Third, due to the expiration of incentive points, a burden is placed on the customer to check when those incentive points expire. A customer who plans to utilize the incentive points must continually be aware of when they expire so as to be able to take advantage of them before they expire.
Fourth, the value of the incentive points to the customer is typically only observed once. When the incentive points are redeemed, the customer does not receive any financial benefit in the future. This is especially true when the customer acquires frequent flier miles. Once the customer has purchased his plane ticket using his incentive points, he will not receive any financial benefit from those points in the future.
Fifth, the redemption of the incentive points is not automatic. The customer must specifically request when he or she chooses to redeem the incentive points. This requires the customer to coordinate the purchase to be made with a convenient time in his or her life. If the customer cannot redeem his or her incentive points at a particular time due to the customer being busy with other things, the customer my lose the incentive points after an expiration date.
Sixth, the current incentive programs do not build loyalty with a particular company. The reason is that most incentive point systems are used to purchase goods from the company providing goods or services rather than the company itself. The cardholder only cares about getting the final product and not the health of the company. This relationship does not build loyalty as much as if the cardholder were an owner of the company. By owning a part of the company, the cardholder will be more loyal to the company.
There is a therefore a need to provide incentives to credit card and other financial transaction media customers which encourage the customers to use their credit cards or other financial transaction media over money and the credit cards of other financial institutions. For example, there is a need to eliminate the relatively long length of time a customer must use his financial transaction medium before he may acquire enough incentive points in order to redeem them for an appreciable difference in cost when obtaining or purchasing goods or services using the incentive points. Additionally, there is a need to alleviate the problem of expired incentive points as well as the burden on the customer in monitoring his incentive points so that he may use them before they expire. Additionally, there is a need to provide items or services which can be obtained by a customer once, but than have potential increased value in the future. Also, there is a need for a method and system that automatically redeems a customer's acquired incentive points for valuable goods and services such that the burden of monitoring the acquired incentive points is alleviated. Finally, there is a need to use acquired incentive points that are redeemed under the customer's control such that the customer builds a loyalty to a particular company.